The Federal Reserve is likely to adopt a cautious “wait and see” stance on interest rates after April’s Consumer Price Index (CPI) showed inflation remaining stubborn even as some measures cool.
Core inflation, which excludes food and energy, held steady at 2.8% year-over-year for the second month in a row—well above the Fed’s 2% target.
On a monthly basis, core inflation rose 0.2%, up from March’s 0.1% but still below many forecasts. Economists at Morgan Stanley and Bank of America say the effects of tariffs implemented under President Trump have yet to be fully reflected in the data; those impacts are expected to appear more clearly in May or June readings.
Market participants increasingly expect the Fed to pause on policy changes at the June and July meetings, pricing in a possible first rate cut as early as September.